Week 1 Flashcards
What is the purpose of accounting?
To provide managers with reliable information for key decision-making.
Why do non-accountants need to understand accounting?
To interpret financial and non-financial information properly.
What is capital in accounting?
Amount owner invested.
What does sales refer to in a business context?
Income earned from selling products.
Define purchases in accounting terms.
Costs incurred in buying goods for resale.
What are expenses in a business?
Costs incurred to enable the business to trade.
What are drawings in accounting?
Amount taken out of the business for the owner’s personal use.
What is the entity concept?
Transactions of a business should be recorded separately from its owner.
What is a cash budget?
Estimates projected cash inflows and outflows.
What are cash sales?
Sales where cash is received at the same time as goods/services are delivered.
What are credit sales?
Sales where goods/services are delivered before payment is received.
What are cash purchases?
Purchases paid for at the same time as goods/services are received.
What are credit purchases?
Purchases where payment is made after goods/services have been delivered.
What is gross profit?
Sales minus cost of sales.
How is gross profit margin calculated?
Gross profit / sales x 100.
Fill in the blank: Gross profit = _______.
Sales – cost of sales.
True or False: The gross profit margin assesses the profitability of products sold by a business.
True
